Thursday, July 26, 2012

Corporate Philanthropy and the Boundaries of the Firm

Frederick Bereskin (Univ. of Delaware-Finance), Terry L. Campbell II (Univ. of Delaware-Finance), and Po-Hsuan Hsu (Univ. of Hong Kong) have posted "Corporate Philanthropy and Expansive Innovation:  Implications for the Boundaries of the Firm," to SSRN.  The abstract of the article is as follows:

We examine the association between corporate giving and innovation, using a unique data set of both direct giving and foundation giving. We find that direct giving by firms is positively associated with both higher innovation quantity and quality and more collaborative and explorative innovation. This relation is robust to increased lags, tests for sample selection bias, and reverse causality, suggesting that direct giving helps firms expand their knowledge frontier. In contrast, our results do not hold for giving by corporate-sponsored foundations. Our findings provide broad evidence of the distinct motives by which firms choose between direct giving and giving through a corporate foundation and have implications for why firms prefer to avoid mandatory disclosure of direct giving. Our results support the hypothesis that firms can use direct philanthropy to pursue innovative strategies that expand the boundaries of the firm.


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